Let’s clear this out - the majority of traders on Forex have little amounts of money. They come to trading exactly to make those profits. The ability to make actual income with minimal investment is the main advantage of Forex over other financial markets. Today, thanks to leverage, traders can enter trading with a starting capital of only $1.
But ability to trade and expediency are two different things. The main question remains whether it has a point to open an account with only 10 bucks in your pocket. The answer is ‘yes’. And now I will tell you why.
Practice Is Key
All traders follow the same path:
- Acquisition of knowledge
- Practice on a demo account
- Real money trading
On an emotional level, the last step is the most difficult. Even constant victories on a demo account may not provide you enough confidence when trading real money, since this time you are risking your personal funds. Overcoming the fear of loss can be very difficult. Therefore, it is important that your first steps in trading are small. So a low initial capital gives you two advantages at once:
- The ability to trade only in small volumes. This way, you practice while learning to manage your risks.
- The fear of loss decreases as you risk small amounts
Unfortunately, you can’t make significant profits with really low capital. Then what is the point of such trading? Practice! This is one of the most important steps towards success. With a small deposit, you gain valuable experience without the risk of losing a significant amount of money.
Couple Beginner Tips
If you are starting out with little capital, choose the appropriate account type. Each broker offers a different option but most of them have two main qualities:
- High leverage. For example, 1:1000.
- Ability to trade in cents.
Both points allow you to make real transactions, even if you have no more than $10 in your account. But at the same time, you can hone your skills, practice and improve your trading strategy. And all this with only minimal capital risk.
However, the ability to lose that $10 alone shouldn't affect your risk management system. Even if you are not afraid of losing such an amount, make sure to strictly follow the basic rules of the risk management system:
- Always use Stop Loss and Take Profit levels.
- Don't risk more than 1-2% of your capital at a time. That is, with a deposit of $10, the maximum allowable risk should be 10-20 cents.
- Control your risk-to-reward ratio. The preferred level is 1:2 or even 1:3. That is, with the risk of losing 10 cents, your expected profit should be at least 20-30 cents.
Of course, the numbers from the list above are not impressive. But we are practicing, right? Once you start making a steady profit, you can invest additional funds and increase your profit. You can use your practice time to accumulate these funds. So if right now you have $10, or $50, or $100 to spare, fund your account and start practicing. The acquired skills will help you significantly increase your future investments.